Ethereum-ized Bitcoin Can Now Gain Interest, Smart Contracts Becoming Safer

Good morning! Here’s what’s happening in decentralized finance land:

  • Compound Finance adds WBTC to its platform

  • Nexus Mutual is offering protection against smart contract failures


You Can Now Earn Interest on Ethereum-ized Bitcoin

DeFi projects keep finding ways for Ethereum to suck up more Bitcoin. The latest: Hodlers can now earn interest on their Bitcoin-linked tokens.

Ethereum-based money markets platform Compound Finance added Wrapped Bitcoin to its platform yesterday. WBTC is an Ethereum ERC20 token that’s backed 1-to1 by Bitcoin, custodied by Palo Alto-based BitGo.

WBTC holders can deposit the tokens on Compound and start gaining a return, or they can use other coins as collateral to borrow it. WBTC won’t be used as collateral for now because, “the asset is custodial and there is a small (but non-zero) risk that an infinite quantity is printed,” Compound founder Robert Leshner said in a message.

Compound’s website said the annual rate on WBTC deposits is 0.01 percent, but the rate will be determined by the market and will change as it gets used.

Traders use WBTC to get Bitcoin’s market performance, while staying on Ethereum-based platforms. Demand for WBTC has soared from virtually zero at the start of the year to almost 560 BTC locked up as of yesterday, according to Defi Pulse. That number jumped from 323 BTC at the start of the month.

Compound’s new feature will likely continue to fuel demand. There was already $758,000 of WBTC in the platform a couple of hours after the announcement.

Smart Contracts Protection is Here and Growing

Nexus Mutual, a platform to protect against smart contract failure, launched five days ago and users already purchased more than $200,000 of cover.

It’s a key piece of the decentralized finance puzzle, as users can now diminish the high risk of taking out loans, depositing funds and trading in very early-stage platforms, dealing with very early-stage technology.

Users chose the cover amount and period to protect against failure on any smart contract verified on Etherscan.

“You can currently earn 11.64% on your DAI with Compound Finance. Now you can be covered against smart contract bugs for 1.3%,” Nexus tweeted yesterday. “Sleep soundly and earn over 10%.”

The project is a mutual linked to a legal entity in the U.K. It’s wholly owned by its members, who have legal rights to its assets and can make decisions like changing the minimal capital requirement and reshuffling the advisory board. Members need to got through a know-your-customer procedure and residents in 18 countries including China, Japan, Germany, Mexico and Russia, can’t get membership.

Crucially, members also determine what claims get paid out and are incentivized through token-economics in the platform (read the details in their whitepaper) to make the right decisions.

So not not fully decentralized, not globally available, and the payout mechanism hasn’t been tested, but it’s a great start.